Oil prices surged by approximately 2% on Monday, January 22, due to concerns over global energy supplies following a Ukrainian drone strike on Russia’s Novatek fuel terminal.
The West Texas Intermediate futures contract for February rose by $1.78, or 2.42%, ending at $75.19 per barrel. Concurrently, the Brent contract for March increased by $1.50, or 1.91%, settling at $80.06 per barrel.
Reportedly, Ukrainian drones struck a significant fuel terminal near St. Petersburg, affecting the Ust-Luga facility on the Baltic Sea. This facility exports 1.35 million barrels per day of crude oil, fuel, and refined products, according to Kpler data.
Bob Yawger, the managing director and energy futures strategist at Mizuho Americas, expressed concerns over a potential policy decision by Ukraine to attack Russian oil infrastructure. Andrew Lipow, President of Lipow Oil Associates, noted the vulnerability of such facilities to attacks, not only in Russia but globally, particularly in the Middle East.
John Kilduff stated that if the targeting of Russian oil infrastructure persists, it could be a game changer, which is what the market is currently pricing in.
In the Middle East, U.S. Central Command reported that numerous American personnel are being assessed for “traumatic brain injuries” after an assault on an airbase in Iraq on Saturday. This attack was carried out by Iran-allied militants using ballistic missiles and rockets.
Such militants, in retaliation to Israel’s military operation in Gaza, frequently target U.S. forces in Iraq and Syria. Additionally, Houthi militants aligned with Iran continue to attack shipping in the Red Sea, a crucial trade route, despite U.S. airstrikes.
Fears are escalating that the U.S. and Iran might become more entangled in a regional conflict, which could disrupt oil supplies.
In other news, full production at the Sharara oil field was resumed on Sunday by Libya’s National Oil Corporation, following a two-week shutdown due to protests. Sharara, with a capacity to pump 300,000 barrels per day, is one of Libya’s major oil fields.